I Don’t Feel So Good: California’s New Sick Leave Law

California’s new mandatory sick leave law represents one of the most substantial new labor regulations in years. Some pieces of the law became effective on January 1, but the Big Kahuna date is July 1. We’ll give you the basics here, with two important caveats:

1) This is not legal advice…consult a good labor attorney if you have questions; and,

2) Various implementation items and questions have yet to be sorted out…this information is based on our best current understanding of how the law will roll out.

To begin, this regulation applies to all employers, regardless of size or sector. It applies to nearly all employees: full-time, part-time, seasonal, temporary, out of state employees working in California, exempt and nonexempt. The qualification is that the person needs to work in California for 30 days in a year (these days do not have to be sequential). The only exceptions are for employees covered by a collective bargaining agreement that meets certain standards such as providing paid sick leave and providing for arbitration, and for certain construction workers again covered by collective bargaining.

There are two methods that are approved for providing this time: accrual and lump sum.

If you choose to go the accrual route, your existing employees will begin accruing this time on July 1, 2015. The law requires that employers provide at least 1 hour of paid sick leave for every 30 hours worked. New employees begin accruing on their hire date, after July 1. Your exempt employees are assumed to work 40 hour weeks. One of the issues that is not sorted out yet is the cloudy area of the exempt employee who works a different number of hours…the smart advice here is to document the hours actually worked and base the sick time accrual on those. Some important features of using the accrual method are:

Accrued sick time cannot be use-it-or-lose-it

BUT employers can cap the accrual at 48 hours or 6 days AND

Employers can cap the use of the time to 3 paid days within a calendar year AND

This time does not have to be paid out at separation

If you choose the lump sum route, you need to provide the minimum of 3 days of paid sick leave on January 1 going forward and (our understanding of the law this year) on July 1 of 2015. Again, this time does not have to be paid out at separation. The advantages of the lump sum approach are mostly in reducing the administrative burden. You don’t have to have an accrual system, you don’t have to roll over accrued leave, etc. The disadvantage is pretty obvious: you’re providing a benefit right up front for an employee where there is no guarantee of how long they will be with you.

Employees can begin using their sick time no later than after 90 days of employment. The law is prescriptive on how employees can use this time. Appropriate use of the leave include time for diagnosis and treatment of an existing health condition for the employee or for a family member. It is important to know that this definition of family member is broader than the one the federal government uses for FMLA. In addition to a child, parent, spouse or registered domestic partner, the law provides for care for grandparents, grandchildren or siblings. The law specifically states that victims of sexual assault, domestic violence and stalking can use their sick time to deal with health conditions that arise from those situations.

The law prohibits requiring the employee to arrange for their own replacement at work. According to the California Chamber of Commerce, employees “are in the driver’s seat” on how they use this time. Retaliation for using or inquiring about the time is prohibited. The chamber’s guidance (they admit to being cautious/conservative) includes accepting the employee’s word that they are caring for a family member covered under the law, and not requiring a doctor’s note to miss or return to work. Employees are encouraged to give advance warning when possible that they will be taking the time.

On the employer’s side, you can require an employee to take this time in increments of at least 2 hours, but not more than that.

When it comes to actually paying out the time when it is taken, you must pay no later than the next payday after the leave was taken. This is paid at the regular rate for hourly workers. Employees with variable rate of pay (say piece work or commission-based employees) come under this formula: Wages for the previous 90 days/hours worked (exempting any overtime premiums) x sick leave hours taken. For exempt employees, the smart money says to base this on 40 hour weeks in most cases, and to make and document a good faith effort for those cases when you have an exempt.

We mentioned that, at separation, employers do not have to pay out unused time. You do have to keep records of it, however, because if an employee returns within one year of separation, you need to restore any paid sick time they had at the time of separation…and they begin accruing new paid sick time on day one when they return.

With respect to records, you need to keep the following information for three years:

The hours each employee worked

The paid days of sick leave accrued

The paid days of sick leave taken

Advancement of sick leave, if your organization does this

This must be in a form that can be inspected by the Labor Commissioner and by the employee

There is a legal presumption that, without these records, the employee is entitled to the maximum amount of leave

As you likely have guessed, this new law comes with new posting requirements. You should already have an updated Wage Theft Notice (this applies only to non-exempt employees) and your required poster with all of the wage information. As of July 15, you must report the paid sick leave hours accrued or allocated, and the amount available to be taken by the employee. This information can either go on the currently required wage statement (e.g., payroll slip), or in writing along with the wage statement.

Suffice it to say that there are a list of penalties for not complying with this law. Both the Labor Commissioner and the Attorney General are charged with enforcement, and private attorneys can sue for civil damages as well. The law makes a provision that there is not legal liability for “isolated and unintentional errors”…clerical mistakes, and the like, but our advice is that your policies and procedures need to be tight to demonstrate that the error was, in fact, an isolated error.

If you have an unlimited paid time off policy, one where employees get a certain amount of paid leave that they can take however they want, things become even more complicated…too complicated to try to sort out here. You may want to engage one of Sequoia’s human resource management consultants, or an attorney.

Of course, many employers already provide paid sick time or paid time off. If you provide sick time already, and it covers what is required by this legislation, you don’t need to change your policy nor do you need to add 3 days of additional sick time. Be careful, however, and remember that the law isn’t just about the amount of time but also what it can be used for and it adds new restrictions on retaliation and discrimination. Again, seek legal counsel if you have questions on whether you’re compliant with this.

You can be more generous, if you like. This law sets minimum standards. The law does not reduce any obligations an employer has under existing collective bargaining agreements and contracts. CalChamber states that the “mandate does not impact existing leave laws or locally adopted leave law. However, conflicts exist, which raises compliance questions.”

It’s going to take a year or so for all of this to shake out. Some clarifying legislation is being talked about for this year’s state legislative session, including by Lorena Gonzalez, this bill’s primary author. In the meantime, make a good faith effort and do the best you can.

If you need help with setting up a system or understanding the basic HR practices involved here, email me at kraft@sequoiapersonnel.com. And, once more, a labor lawyer could be your best friend.

The information provided in this blog is intended for general information purposes only. Readers should seek the help of an HR professional for guidance on specific issues.